Welcome to the world of trading!
PF (Profit Factor) and PR (Payoff Ratio). Both are represented by similar letters and can be confusing, but they measure how efficiently your method performs—like the fuel economy and acceleration of a car.
We invite you into the world of trading.
1. PF (Profit Factor)
“What is the total profit?” report card
PF is the ratio of total profit over total loss for a given period.
Image:How much comes back for every 1 yen loss?
Standards:
Less than 1.0:Capital is shrinking (red light)
1.0 or more:Capital is growing (black/or profit)
1.5–2.0:An ideally superb trade!
[!TIP]
How to interpret:> PF is the balance of offense and defense. No matter how large your wins, if you lose more, PF falls below 1 and heads toward ruin.
2. PR (Payoff Ratio)
The impact of “win per hit”
PR is the ratio of “average profit” to “average loss.” It is also called the risk-reward ratio.
Image:How many times more do you win than you lose on a single trade?
[!TIP]
How to interpret:> PR is the power of a single strike. Even with a low win rate, a high PR (for example, 3.0) can offset all previous losses with one win.
3. Which matters more? (Comparison summary)
In short,you adjust PR (the strategy) to achieve PF (the result).
| Item | PF (Profit Factor) | PR (Payoff Ratio) |
| Meaning | Overall efficiency | Per-trade profit/loss ratio |
| Role | Final judgment on whether the method is profitable | Defines the character of the method |
| Weakness | Cannot be trusted with few trades | Meaningless if you ignore win rate |
Key relationship
In other words,even if PR (weight of a single hit) is low, PF can rise if the win rate is high.Conversely, even with a low win rate, PF can be maintained if PR is high.